Do you have a culture of accountability, clear purpose and the pursuit of profits?

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As a consultant to the ARM industry I see the lack of these things in almost every agency and law firm I visit. Most of the managers do not create a CLEAR structure for the staff to follow and when there is a breakdown in the process there is no CLEAR accountability. Very few collection shops are built on a profit business model. They instead have the same old model that provides whatever profits it provides which is why so many operators are complaining about their reduced profit margins.

Many firms have many people responsible for the same things so when something goes wrong there are no clear reasons as to why or who to train better. If you run a shop of accountability then the fault clearly lands on someone’s plate and then solutions are more clearly defined and enacted. When the entire office misses goal; who do you blame? But if you have several KPI’s and the entire team misses goals but 7 of the 10 KPI’s were hit the fault lies in the remaining KPI’s that were diminutive and there should be a person in charge if each KPI.

The truth is you can have whatever level of profit margins you desire if you build the right collection process and can locate business with those margins. OK you don’t believe me look at it this way if you say I need a 20% profit margin and have a collection process that is accountable and traceable all you need a placement that can provide that profit margin within your accountable process. Now you say this 20% business does not exist, well maybe not much these days can provide a 20% profit margins after all costs are accounted for but you see the point.

The problem with the old process of collections is it is not based on a profit quotient; it is a carried on tradition from days when profit margins were 40%.  We incented the collectors to collect more, as that is what drove profits now we have more costs buckets to consider than years past. The cost of consumer lawyers, skiptracing, technology, skip and asset location, licenses, dialers, marketing and more that has all changed over the years. Profits now come from controlling expenses!

If you want to focus your group on profits set them up as a small business within your business. Give the unit manager a budget for skip, letters and payroll and then determine the overall costs he faces with overhead. It’s a cost per seat equation;

Total costs divided by

Total number of FT revenue makers= Cost per seat

So if you have a group of 10 collectors and one manager and the cost per seat is $5000.00 monthly and you desire 20% profits the group must collect $55,000 in gross fees to cover expenses and another $11,000 for the 20% profits. Once the group has reached the $66K mark the owner has his profits of 20% and is in bonus mode. Now the owner has taught the manager how to use costs and profits to run the company. The owner can reward that staff for overachieving by sharing the overage at a high percentage maybe even 50/50.

This not only teaches the staff to work based on budgets and a fixed cost but encourages profits not just production. If you need help creating a culture of accountability, purpose and profits call Lighthouse Consulting LLC.

Phillip W. Duff

Phillip W. Duff the Founder of Lighthouse Consulting was trained in Six Sigma while working for Bombardier Capital in 2001, and is highly successful helping organizations improve their processes using the Six Sigma methodology. Mr. Duff has consulted with numerous companies over the last 10 years and has shown the ability to enact cultural change in a company. He has also initiated programs proven to drive positive revenue growth both as an employee and a consultant. His focus is to help CEO’s with a focus on growth. His knowledge of technology and background in debt collections have combined to help companies automate processes and identify which processes provide profits. Mr. Duff has also developed a unique process of initiating cultural change as a part of developing a revenue-driven atmosphere in a variety of formats. This unique philosophy and technique are unseen to date. His substantial experience in the collection industry, Six Sigma core competency and extensive industry relationships can provide you and your team a matchless perspective into your accounts receivable business or any business strategy.

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